Professional US talent has always been highly desirable for those looking to hire internationally, especially to Japanese companies wanting to hire in the US.
Not only does the American labor market offer a highly diversified and skilled talent pool, but the professional market size and population are a huge benefit for Asian companies that want to expand outside of their region.
To hire in the United States, however, there are certain things that Japanese companies will need to consider. Aside from compliance with United States federal law, it’s also essential to adhere to the different rules and regulations regarding labor in each separate state. These include payroll, employee benefits, taxes, notice periods, and more.
In this guide, we’ll cover how a Japanese company can hire in the US. We’ll also explore what Japanese companies need to know if partnering with a global Employer of Record (EOR) to oversee the legalities and potential costs of hiring in the United States.
Can a Japanese Company Hire in the US?
The short answer is yes. There are no rules or regulations which state that Japanese companies cannot hire in the US.
However, many legalities must be taken into consideration to ensure that companies are adhering to United States national and state employment laws.
Here are some ways for a Japanese company to hire in the US. And several considerations to keep in mind when employing American workers.
3 Ways Japanese Companies Can Hire in the US
1. Engage United States Workers as Contractors
Onboarding workers as contractors might be the easiest option for Japanese companies. However, there are still certain things that Japanese companies must consider to ensure that all legal working conditions are met.
Independent contractors in the United States are self-employed individuals who provide their services to the company while choosing their own working hours and schedules.
As with Japan, a United States-based contractor is treated independently from a company’s internal employees. Contractors hired independently are not paid a fixed salary or expect to use the company’s work equipment.
This allows companies more flexibility and is more cost-effective when hiring for specialized services or one-time projects. Independent contractors may also provide their services to a company for extended periods of time.
However, if you are considering engaging independent contractors, you must first know all legal risks associated with misclassifying contractors as full-time employees. Companies that misclassify employees – whether accidentally or intentionally – may be liable to pay tax violation fines, including up to 3% of the misclassified employee’s wages as well as associated FICA taxes.
Japanese companies might also face fines for federal labor law violations under the United States Fair Labor Standards Act (FLSA).
2. Establish a Foreign Entity in the United States
Another option for Japanese companies to hire in the US is to set up a foreign entity. Opening an entity in the United States allows you to create a branch or subsidiary to hire workers directly. Setting up a foreign entity allows Japanese companies complete control when hiring local workers, managing payroll, and establishing a local branch.
Depending on the nature of the business, your company may need to obtain proper permits or licenses from local, state, or federal authorities to operate legally in the US.
Establishing a foreign entity is a good option if your company plans on hiring multiple workers or creating a more established long-term presence. It is, however, a costly and time-consuming process that requires knowledge of the country’s legal and corporate regulations, payroll laws and federal taxes.
Consider consulting with local legal professionals or institutions, such as an established employer of record (US EOR) if your company is considering this path.
3. Partner With an Employer of Record in the United States (US EOR)
The third, and arguably easiest option, is to engage employer of record services (EOR) to hire, pay, and manage your US-based hires. Because the EOR partner is already set up as a legal entity in the United States, they will help ensure that their client company is in alignment with local labor laws and requirements.
A US EOR partner will act as the legal employer for your staff in the US. It will offer global payroll solutions for company employees, as well as take care of tax deductions including Federal Income Tax, Social Security Taxes, and Medicare tax, and potential additional private health insurance.
Ultimately, a US EOR partner is the easiest option. It will help streamline the entire hiring experience while protecting against legal mishaps so you can focus on growing and expanding your business.
Things to Consider When Hiring in the United States
As the professional working landscape in the United States is quite different from Japan, many legalities and government requirements will affect both the employee and the employer.
United States Employment Laws
United States employment laws can vary by state and include considerations such as:
- Minimum wage (set by US federal law as $7.25 per hour. This rate may vary from state to state.)
- Overtime pay of one-and-a-half times the employee’s hourly rate for any hours over 40 worked per week.
- Standard employee benefits as mandated by the United States Federal Government.
Additional statutory benefits and employee leave entitlements will also need to be considered when hiring employees in the United States.
Cultural Differences and Language Barriers
Understanding and respecting cultural differences is crucial for Japanese companies that wish to hire in the US. American business culture varies significantly from Japanese work culture. As such, it is crucial that you familiarize yourself with the basics of American business etiquette, communication styles, and social norms before onboarding employees in the US.
As a potential employer, it is also vital that you are skilled enough in the English language to effectively communicate with employees, as many Americans do not speak or understand Japanese.
Employment Contracts and Notice Periods in the US
Employment contracts should clearly outline job responsibilities, compensation, and other terms of employment. This includes at-will employment, which is a US employer's ability to dismiss an employee for any reason, and without warning, so long as the reason is not illegal. This applies to all states except for Montana.
For employees planning to quit, a two-week notice period in the US is considered standard by most employers. However, employees in most US states are not legally required to give a two-week notice, or any notice at all.
While it is not legally required by any federal or state laws, a notice period allows sufficient time for both the employer and the employee to tie up loose ends.
These standards vary slightly from those in Japan, where it is common for the employee to submit their resignation at any time without notice if they have worked at the company for at least one year.
Tax Considerations
Hiring in the US will likely pose tax implications for your company. You must understand and comply with US tax laws and regulations, including payroll taxes, social security taxes, medicare taxes, and possible 401(k) contribution-related taxes.
Payroll processing for your global team can be a real challenge if you're unsure how to navigate it. However, partnering with an established Employer of Record (US EOR) can help ease some confusion surrounding United States tax considerations.
Workplace Regulations and Local Employment Laws
You must be aware of workplace regulations and local employment laws related to safety, discrimination, harassment, and other labor-related matters when hiring in the US.
These regulations can vary from state to state, meaning your company will be responsible for creating a safe working environment. To ensure this, both the employer and the employee should be fully aware of their rights at all times.
Human Resources Management
Whether you are looking to hire employees or establish a legal foreign entity, your company should have a plan to manage human resources matters. These can include onboarding, employee training, and management.
You'll also need to ensure that any United States nationals that you employ have the right paperwork in the state in which they are employed. If you're hiring foreign nationals who reside in the US, it is crucial that they hold a foreign equivalent degree and labor certification to be employed by your company.
Your HR department will be responsible for such considerations as you onboard your global team, not only in the US but potentially in other countries as well.
Common Employee Benefits in the US
You should also ensure that all local employees are given appropriate paid time off and benefits as required by United States law.
Employers must provide legally mandated benefits to all eligible employees, including the following.
Paid Time Off (PTO)
By law, the average American worker is entitled to 11 days of paid vacation per year. In addition, employees are allowed eight days of sick leave annually.
The United States Government also recognizes the following ten annual holidays, as well as Inauguration Day every fourth year.
- January 1 (New Year’s Day)
- 3rd Monday in January (Martin Luther King’s Birthday)
- 3rd Monday in February (Washington’s Birthday)
- Last Monday in May (Memorial Day)
- June 19 (Juneteenth National Independence Day)
- July 4 (Independence Day)
- 1st Monday in September (Labor Day)
- 2nd Monday in October (Columbus Day)
- November 11 (Veterans’ Day)
- 4th Thursday in November (Thanksgiving Day)
- December 25 (Christmas Day)
Personal Leave Entitlements for US Workers
Holidays and Annual Statutory Leave
Although there are several national holidays acknowledged by the United States Government, there are no federal laws that require your company to provide employees with time off.
It is, however, common for companies to provide employees with paid time off to accommodate national and local holidays.
Annual vacation time allowed by employers can vary and ranges from one week to three weeks or more per year for long-time employees. Employees who are part of a labor union might also receive additional days off depending on the terms of their labor agreement.
Maternity and Parental Leave
The Family and Medical Leave Act (FMLA) requires companies that employ 50 or more employees to provide twelve weeks of unpaid leave for employees to accommodate the birth of a child. Some state laws also provide maternity leave for employees not covered under the FMLA.
Though they are not required to, many states will also provide employees partial pay during parental leave. This is largely dependent on the employer and is up to their discretion.
Medical Leave
In most cases, United States employees are entitled to unpaid sick leave under the Family and Medical Leave Act (FMLA). This allows employees to take up to twelve weeks of unpaid medical leave for health conditions preventing them from fulfilling their assigned tasks. Routine medical care and minor illnesses are generally not covered.
Disability Leave
Employees with disabilities may be entitled to unpaid leave under the FMLA and Americans with Disabilities Act (ADA). Though the ADA is not required to compensate employees while on disability leave, it does require companies to accommodate employees with disabilities. Such accommodations may include extended employee leave, as long it is not an unreasonable amount of requested time.
Social Security and Medicare Contributions
By law, companies must provide retirement benefits and health insurance for employees under federal Social Security and Medicare programs. According to the United States Internal Revenue Service (IRS), all companies are required to contribute the following:
- 6.2% of every employee’s salary to Social Security
- 1.45% of every employee’s salary to Medicare
Contributions equal to these amounts should be deducted from each employee’s wage as an employee contribution.
These contributions provide benefits for retirees, disabled workers, and children of deceased workers. They also provide hospital insurance benefits for all United States residents and registered nationals.
Healthcare and Insurances
Both local and international companies that do not offer affordable health insurance options to full-time employees may be faced with financial penalties as stated by the Patient Protection and Affordable Care Act. Your company will be subject to a penalty of $2,570 USD per employee if you do not offer health insurance to the majority of your full-time employees.
Employee Pensions
While it is not legally required for employers to provide employee pensions or retirement benefits, many American companies provide employees with some retirement benefits. Such benefits are most commonly offered through state-sponsored retirement plans such as a 401(k) or an SEP IRA under the Internal Revenues Code.
Employees are typically given additional benefits, though these are dependent on the size of the company. These include standard health insurance and paid parental leave, as well as disability insurance, life insurance, dental insurance, vision insurance, compensation for work-related travel, and sometimes wellness benefits.
Common Risks for Companies That Hire in the US
There are many considerations for Japanese companies that want to hire in the US. This section will briefly outline a few of the most common risks that may be overlooked.
Employee Misclassification
Companies must ensure that all employees, whether engaged as a contractor or hired full-time as employees, are classified correctly. Misclassification is a common issue amongst international companies. As such, the IRS emphasizes the importance of proper classification so companies don’t run into unnecessary tax complications.
To avoid such fines and potential tax implications, consider working with a legal expert, such as an employer of record (EOR), which can help your company avoid misclassification through proper contracts, accurate reporting, and correct payroll deductions.
Incorrect Payroll Contributions and Deductions
Japanese companies must consider contributions such as social security and Medicare contributions, paid time off, healthcare, and other insurances.
Companies must calculate, deduct, and contribute the correct amount to US authorities. Lack of deductions or incorrectness in deductions and contributions could result in legal complications or fines for the employer.
Potential Visa Requirements
Japanese companies that hire in the US must check that employees have the correct legal authorization to work in the United States. This might involve obtaining a work visa if the employee does not have proper documentation to work and pay taxes in the United States.
Such visas might include an H-1B visa (for specialty occupation workers), an L-1 visa (for intra-company transfers), or other relevant visas based on the individual's specific circumstances.
Why Choose Borderless?
As an established EOR, we can help you hire in 170+ countries, including the US. Borderless is highly knowledgeable and experienced in assisting international companies that wish to hire in the United States. See for yourself how Borderless can help you simplify the hiring process. Book a demo today!
Disclaimer
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
